Cross-collateralisation is a contractual term allowing a label to recover the unrecouped balance of one project out of the earnings of another.
The mechanism
Without it, each project settles on its own account. With it, the accounts are pooled, so a deficit on one release is cleared from the proceeds of a later one before the artist participates.
A worked example
An artist whose first two albums remain unrecouped can find a successful third album clearing those deficits before it pays them anything.
What it is confused with
- Recoupment Recoupment is repayment from the artist's share. Cross-collateralisation determines which projects' shares are available to repay from.
Why it matters
It is the clause that most often explains why a hit record produces no payment, and it is negotiable more often than artists assume.
Sources: US Copyright Office
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Related: Recoupment · Black box royalties · 360 deal